Money management

DURING this series I am looking at a number of issues relevant to all small and medium enterprises and identify both the opportunities and challenges associated with each issue.

Topics to be covered include planning; staff and recruitment; customers and service; marketing; competition; new products and services; being well organised; collaborating with others; understanding and analysing risk; managing the money; going into business with family or friends; grants, loans and investment; expansion and growth; technology and exporting.

Today my focus is on managing the money.

Leaning how to manage our money is crucial to all business owners and of extra importance to SMEs where money is sometimes hard to come by.

It is a real temptation to think that just because we have money in our pocket we are doing well!

We forget about the bills we have to pay, the taxes we owe, the staff we must pay on time, the equipment we need to buy and so on.

One challenge around managing the money is the assumption that it must be difficult or expensive if we need an accountant. Not managing our money well could certainly be expensive.

Start out with a simple cash flow and budget — this can be on paper or on a spreadsheet on your computer.

There are many packages on the market aimed at helping SMEs manage their money (MYOB, Quickbooks and Xero are well-known ones in the Pacific).

You might find it confusing to know which one to choose.

My advice is to ask around — ask your bank, ask other business owners, ask your local chamber or business association, ask your mentor.

Keep it simple!

Especially at the beginning.

If finance is new to you try signing up for a financial literacy or business finance course.

It is worth putting in the effort to understand cashflow, profit and loss, break-even, budgets, point of sale, capital expenditure etc.

The more you understand these terms the easier it will be to decide what you need for your business.

Online systems are certainly useful but a very simple business may not need anything so complex.

An old-fashioned cash book and receipt book might still do the trick.

Whatever system you decide on it must work for your business.

It needs to help you estimate and record all expenses and record all income.

Get into the habit of asking for receipts for everything you spend where at all possible and keep the business money separate from your own.

It only becomes yours once you have paid everything you owe!

If you do not keep a record of everything you spend then you cannot manage it.

At least monthly review your expenditure and see if there are ways in which you can reduce it or use the money more effectively.

Stop and think before you make a large purchase — can you afford it; do you really need it at this time; is it the best use of your money; do you need a new one or will second-hand do?

Managing your income and expenditure is an essential part of running a good business.

You cannot afford to avoid it.

If you bury your head in the sand you might be throwing away your hard earned cash.

Ask someone to help you set up a money management system that is right for you and avoid paying for more than you need.

Finally when starting a business try to avoid a loan — it is not a good idea to start a new venture in debt if you can possibly avoid it.

Maybe you start smaller or slower; maybe friends and family can support you; maybe you limit yourself by your own resources.

All over the Pacific people go to NZ or Australia as seasonal workers and return with money to start a business.

If you do this, plan ahead and think through what you need and where it is going to come from.

If you are tempted to borrow money, check out the terms and conditions and the interest rates before making any decisions.

In the Pacific there are a number of small micro finance businesses aimed at SMEs.

Don’t be too quick to take a loan — compare what is on offer and look for the best deal.

Discuss your options with your mentor or an independent person before deciding to borrow.

If you need help with understanding or analysing money management or you want some feedback on your own practices, then please get in touch.

* Chris Elphick is partner in Breadfruit Consulting, formerly Learnfast Pacific, supporting the development of a range of businesses and organisations in Melanesia and other parts of the Pacific. He is an experienced trainer, coach and business mentor and has years of experience of working with small and medium enterprises.

He and his partner Hazel Kirkham live in Vanuatu.

Breadfruit Consulting have partnered with Fiji Entrepreneur to develop mentoring services for new and young entrepreneurs.

If you have an issue or query related to this article, please contact Chris at or text to +6785500556

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